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Weeks ago, airlines and the airports requested a whopping $50 billion bail out which was much larger than anything received after 9/11 (almost 4 times the size). And now, their wish has been granted.
Their package will include $32 billion in grants that will go to wages and benefits for aviation employees. The first installment must go to employers within 10 days of the bill becoming a law.
The breakdown is $25 billion for passenger airlines, $4 billion for cargo airlines, and $3 billion for industry contractors such as those who take care of things like catering, baggage, ticketing, and aircraft cleaning.
There will also be a lot given out in the form of loans or loan guarantees such as $25 billion for passenger airlines and $4 billion for cargo airlines.
Past bail outs have involved questionable use of funds (e.g., stock buybacks) and so that was a major point of concern for this package.
Companies that receive funds will be barred from making furloughs, pay cuts, or stock buybacks, and from issuing dividends to investors all the way through September. So this looks like it will be very friendly to employees in the aviation industry and give them assurance that they will receive fair wages.
There will also be limits on executive level compensation.
Finally, some airlines may be required to continue to operate routes that they would normally cancel because of the low occupancy rates or because of low profitability.
This is especially true for smaller or remote communities that need the transportation in order to maintain supply chains for medical needs and devices.
It looks like there may also be a tax holiday that allows airlines to keep more of the ticket price that customers pay.
Airports may also receive assistance up to $10 billion.
This is part of the $2 trillion stimulus package that includes $500 billion for distressed companies, $350 billion for small businesses, and $250 billion for direct payments to individuals and families. (Depending on your income, you may be able to receive around $1,200 per person adult in your household and $500 per child.)
The situation for airlines all across the industry has been much worse than anything seen after 9/11 or the financial crisis of 2008. There have been multiple predictions that many airlines would be going bankrupt within a matter of months and things have escalated very quickly.
For example, earlier this month airline executives met with the president and stated that they would not be needing or seeking government assistance. But now fast forward and they are requesting billions and billions of unprecedented aid.
Hopefully, the stimulus package will help to keep the economy roughly on track and make up for some of the lost revenue in the travel industry as we wait for things to slowly return back to normal.
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Daniel Gillaspia is the Founder of UponArriving.com and creator of the credit card app, WalletFlo. He is a former attorney turned full-time credit card rewards/travel expert and has earned and redeemed millions of miles to travel the globe. His content has been featured in major publications such as National Geographic, Smithsonian Magazine, Forbes, CNBC, US News, and Business Insider. Find his full bio here.